As home sales rise, fewer of them are distressed properties

Published: Thursday, February 28, 2013 at 1:00 a.m.

Last Modified: Wednesday, February 27, 2013 at 7:58 p.m.

The ratio of distressed sales among all residential real estate transactions continues to shrink across Southwest Florida -- especially the bank foreclosures that have long plagued the market.

As total home sales soared to post-bubble highs in 2012, the number of foreclosures and short sales waned, a trend that should accelerate price appreciation regionwide.

"There's still a lot of distress in Sarasota that needs to be dealt with," said Daren Blomquist, vice president of RealtyTrac. "But the bank-owned foreclosures are going down, and those tend to be the most disruptive to the market."

Lenders also have turned increasingly to short sales -- rather than foreclosures -- as the preferred method for handling defaults, another vast shift from the peak of the housing crisis, when home repossessions were frequent, according to a new report by California-based housing data provider RealtyTrac Inc.

"There's always been this talk of another wave of foreclosures, and you see the anecdotal evidence, but it just never materializes," said Scott Norris, a broker associate with Coldwell Banker on Longboat Key. "The numbers in general are going down. We're getting to the end of the line."

There were 6,260 distressed sales in Sarasota, Manatee and Charlotte counties last year, a 5 percent dip from 2011 and a 23 percent decline from 2010, RealtyTrac data shows.

Even more striking, the ratio of foreclosures and short sales compared with other real estate transitions fell in the three counties -- reaching 20 percent in Sarasota and Charlotte last year, and 22 percent in Manatee. By comparison, during the worst of the housing crash, in 2008 and 2009, those tallies flirted with 50 percent, records show.

Market watchers say the progress has had little to do with recession-battered borrowers catching up on their mortgages. The number of homeowners delinquent or underwater on loans is still dangerously high.

Instead, they attribute the decline in overall depressed sales to the federal mortgage program that gave lenders more financial incentives to modify nonperforming loans. New guidelines from Fannie Mae last year also relaxed qualifications on lenders interested in working with underwater borrowers whose payments are still current.

In the fourth quarter alone, short sales on non-delinquent property rose 12 percent from the third quarter and 8 percent from a year ago, Wednesday's data shows.

The 3,051 bank foreclosure sales across Southwest Florida in 2012 fell 13 percent from 2011, and 25 percent from the year before.

In Sarasota, where many of the sales were to investors who planned to rent them out, the average price was $122,909 -- a 35 percent discount to market rates, the report shows.

Meanwhile, the total number of short sales actually grew 3 percent from a year ago to 3,209 -- just short of the record set in 2010.

A short sale occurs when banks agree to a property's sale for less than the value of the mortgage on it. Short sales are preferred by borrowers because they tend to do less damage to credit scores than foreclosures. They help lenders save time and hefty legal fees.

The uptick in short sales in 2012 was bolstered by a tax break on loan deficiencies that was scheduled to end Dec. 31. Although that program ultimately was extended one year, its pending sunset expedited short sale approvals, said Jo Ann Koontz, a Sarasota real estate attorney.

The average short sale in Sarasota last year went for $130,355 -- or more than $7,400 more than the average bank-owned sale.

"We're seeing them move a little more quickly, as real people review these files," Koontz said of banks' recent activity.

The shift away from distressed sales was seen across the state and nation.

In Florida, the 121,361 distressed sales in 2012 eased 3 percent from the year before and 22 percent from 2010. Foreclosure-related sales accounted for 21 percent of all U.S. residential sales during the year, down from 23 percent in 2011 and 28 percent in 2010, according to RealtyTrac.

Many local industry watchers believe another wave of defaults will hit the market in coming months, however, as courts whittle down a four-year backlog of cases.

"The foreclosure backlog still exists, and it's slowly making its way onto the market," said Peter Crowley, broker and co-owner of Re/Max Alliance Group in Sarasota and Manatee.

"That has kept a little bit of a lid on the availability of distressed properties," Crowley said.

"It will definitely have an effect on values and prices because demand has not let up."

<p>The ratio of distressed sales among all residential real estate transactions continues to shrink across Southwest Florida -- especially the bank foreclosures that have long plagued the market.</p><p>As total home sales soared to post-bubble highs in 2012, the number of foreclosures and short sales waned, a trend that should accelerate price appreciation regionwide.</p><p>"There's still a lot of distress in Sarasota that needs to be dealt with," said Daren Blomquist, vice president of RealtyTrac. "But the bank-owned foreclosures are going down, and those tend to be the most disruptive to the market."</p><p>Lenders also have turned increasingly to short sales -- rather than foreclosures -- as the preferred method for handling defaults, another vast shift from the peak of the housing crisis, when home repossessions were frequent, according to a new report by California-based housing data provider RealtyTrac Inc.</p><p>"There's always been this talk of another wave of foreclosures, and you see the anecdotal evidence, but it just never materializes," said Scott Norris, a broker associate with Coldwell Banker on Longboat Key. "The numbers in general are going down. We're getting to the end of the line."</p><p>There were 6,260 distressed sales in Sarasota, Manatee and Charlotte counties last year, a 5 percent dip from 2011 and a 23 percent decline from 2010, RealtyTrac data shows.</p><p>Even more striking, the ratio of foreclosures and short sales compared with other real estate transitions fell in the three counties -- reaching 20 percent in Sarasota and Charlotte last year, and 22 percent in Manatee. By comparison, during the worst of the housing crash, in 2008 and 2009, those tallies flirted with 50 percent, records show.</p><p>Market watchers say the progress has had little to do with recession-battered borrowers catching up on their mortgages. The number of homeowners delinquent or underwater on loans is still dangerously high.</p><p>Instead, they attribute the decline in overall depressed sales to the federal mortgage program that gave lenders more financial incentives to modify nonperforming loans. New guidelines from Fannie Mae last year also relaxed qualifications on lenders interested in working with underwater borrowers whose payments are still current.</p><p>In the fourth quarter alone, short sales on non-delinquent property rose 12 percent from the third quarter and 8 percent from a year ago, Wednesday's data shows.</p><p>The 3,051 bank foreclosure sales across Southwest Florida in 2012 fell 13 percent from 2011, and 25 percent from the year before.</p><p>In Sarasota, where many of the sales were to investors who planned to rent them out, the average price was $122,909 -- a 35 percent discount to market rates, the report shows.</p><p>Meanwhile, the total number of short sales actually grew 3 percent from a year ago to 3,209 -- just short of the record set in 2010.</p><p>A short sale occurs when banks agree to a property's sale for less than the value of the mortgage on it. Short sales are preferred by borrowers because they tend to do less damage to credit scores than foreclosures. They help lenders save time and hefty legal fees.</p><p>The uptick in short sales in 2012 was bolstered by a tax break on loan deficiencies that was scheduled to end Dec. 31. Although that program ultimately was extended one year, its pending sunset expedited short sale approvals, said Jo Ann Koontz, a Sarasota real estate attorney.</p><p>The average short sale in Sarasota last year went for $130,355 -- or more than $7,400 more than the average bank-owned sale.</p><p>"We're seeing them move a little more quickly, as real people review these files," Koontz said of banks' recent activity.</p><p>The shift away from distressed sales was seen across the state and nation.</p><p>In Florida, the 121,361 distressed sales in 2012 eased 3 percent from the year before and 22 percent from 2010. Foreclosure-related sales accounted for 21 percent of all U.S. residential sales during the year, down from 23 percent in 2011 and 28 percent in 2010, according to RealtyTrac.</p><p>Many local industry watchers believe another wave of defaults will hit the market in coming months, however, as courts whittle down a four-year backlog of cases.</p><p>"The foreclosure backlog still exists, and it's slowly making its way onto the market," said Peter Crowley, broker and co-owner of Re/Max Alliance Group in Sarasota and Manatee.</p><p>"That has kept a little bit of a lid on the availability of distressed properties," Crowley said.</p><p>"It will definitely have an effect on values and prices because demand has not let up."</p>